Tina Symons, the HR manager, looked at the employee turnover figures and the new results from the employee survey and sighed. She wondered if she had ever understood employee motivation. Her small team had worked tirelessly over the past 18 months to promote the new branding of the company as an “Employer of Choice”, but the turnover figures and the latest survey showed that the strategy was not working. She wasn’t sure what to do next.
Tina works for Able & Willing (A&W), a financial services company privately owned by Mark Able and Janis Willing. Mark and Janis started the company in the early 1990s. Janis, a chartered accountant who had dabbled in business management services, came to Mark, a computer consultant, and sold him the idea of starting up a business offering planning and software services to small and medium-sized businesses.
The company rode the early 1990s wave of interest in computers and business services. In the four years to 1995, the company grew from 10 to more than 80 full-time staff, as well as having more than 100 self-employed consultants around Australia recommending their PC products and business services. The business attracted a large number of young staff and accountants. The average age of employees and consultants was 32.
In late 1995, Tina Symons was appointed HR manager, to help Mark and Janis cope with the burgeoning staff base, along with new appointments to IT and marketing. Her role was to provide HR and training services for the staff and consultants. Tina reported directly to Janis; from the start there was a coolness between the two women.
When Tina arrived, there was little in the way of HR policies and the salary system was erratic, with staff and consultants in the different parts of the business paid vastly different amounts. In the first two years, Tina spent her time developing basic policies and an induction program. She also began to resolve the salary discrepancies by setting salary ranges and introducing a Performance Management system, despite resistance from her peers in IT and marketing.
In that time, the number of staff grew to 120, the number of consultants increased to more than 300, and staff turnover reached a worrying 28%.
Revenue continued to grow, but in 1997 profit declined for the first time. Concerned at this profit drop, Janis and Mark hired an external consultant to help them review the strategic direction of the business. The outcome was a decision to continue with an aggressive growth strategy. Janis launched an ambitious plan to continue the growth of the business, aiming to double revenue in the following five years by focusing on cost containment, financial management and e-commerce.
When Tina heard this announcement, she did a quick calculation in her head. At the existing turnover rate of, say, 25% and an expected demand of an extra 5-10% of staff in line with the growth figures, there was no way Tina could reach the salary cost containment target of 10%. The company needed to spend more on salaries, not less.
But Janis wouldn’t budge from her view that salaries were a cost and, as part of the cost-containment initiative, it was Tina’s job to meet the targets. What bothered Tina was that the company offered their services at a high fee and was well branded in the market as a premium service, but applied the opposite rules internally: “buy low and sell high” seemed to be Janis’s motto.
To make matters worse, the employment market for financial services sales and IT people was hotting up as the larger financial services organisations started spending big to get experienced staff. In fact, in many exit interviews another initiative of Tina’s the staff responded that A&W was a great place to work, innovative and highly challenging, but that the lure of extra dollars in some reported cases up to 25% increases was too much for young employees to resist.
One day soon after the announcement, Tina saw an article in an international HR journal about how to apply the concept of marketing branding to the “employment product” by branding a company an “Employer of Choice”.
Here was a possible answer. Over the next two months, Tina studied all the available literature and systematically identified all the initiatives that would be required. She intended to build on the positives offered by the company the innovative workplace and challenges provided to staff as well as offering them additional benefits and incentives, so that salary would become less of an issue.
In a meeting with Janis and Mark, Tina laid out her proposal: a significant expansion of HR family-friendly policies combined with an offer of flexible working conditions, including working from home offices.
Mark was immediately enthusiastic, but Janis was cautious about the total cost. In response, Tina argued that the family-friendly policies would have little initial effect because the staff were mostly young and single. Nor would the flexible working conditions policies, because the IT manager had informed her that the company was due to invest in new computers anyway and the older versions could be given to the staff to use at home.
The big potential benefit was that both policies would attract those who wanted more flexibility in their working arrangements and who would settle in and be more loyal over the long term.
Additionally, Tina recommended that significant discounts be offered to staff and consultants who used company products in their home offices. The effects of this would be further to enhance staff loyalty and to create the best sort of advocate for the products as well as increasing revenue, thereby reinforcing the growth strategy.
After a long discussion about costs and benefits, Janis and Mark agreed to Tina’s initiatives.
Tina and her team of three worked hard to promote the new offerings, creating training programs, brochures and an online update. However, when it came to calculating the turnover figures for the financial year, Tina was shocked to see that turnover had increased to 30%, rather than falling.
She wasted no time in commissioning an employee survey to find out what were the attitudes of staff to the Employer of Choice strategy.
Tina now had the results of the survey in her hands. The feedback from staff was partially positive: some staff liked the new policies and felt positively towards the company. But a significant number of comments were to the effect that pay ranges were still well below those of their competitors and that the family-friendly policies were not any better than those of their competitors. Also, there were comments that management was not seen to be supportive of the flexible work conditions: it was felt that they weren’t walking the talk.
Is branding the company an Employer of Choice a useful strategy for Tina to persist with? If so, how can she strengthen the brand in the eyes of staff? And what would she have to do to get the support of the other senior managers? If it’s not useful, what else could Tina do to reduce the staff turnover rate?
The author of this case study, Sharon McGann, is a director of the training consultancy A Passion for Results Pty Ltd, which provides workshops for individuals and groups to explore how to achieve better results together.
Proposed solution #1
David Reynolds has more than 25 years experience as a management consultant and business adviser. He is presently Queensland director of Morgan & Banks and he specialises in career and change management, career coaching, human resource consulting and executive recruitment. He is a Fellow of the Institute of Chartered Accountants.
Before Tina continues with her “Employee of Choice” strategy, she needs to consider many other issues that revolve around the strategy in so far as it affects existing and potential employees. Although the Employer of Choice strategy can be beneficial, the organisation needs to consider what it is that helps retain existing staff and attract new staff.
First, Tina needs to consider the current situation in respect of the marketplace and the escalating “War for Talent”. Recent research from McKinsey/Sibson indicates that there is a rising demand for employees in the knowledge area. At the same time, there is a declining supply of knowledge workers. In particular, it is estimated that, over the next 15 years, there will be a 15% drop in the available supply of 25- to 44-year olds.
In addition, it is important for the organisation to understand what motivates talent. Another survey by McKinsey indicates that several issues ranked ahead of pay in respect of what employees were looking for in their next job. The highest-ranking requirement related to the values and culture of the organisation; followed by the freedom and autonomy offered by the location. This was followed by the need for the job to have exciting challenges and for the company to offer career advancement and growth.
All these issues ranked ahead of differentiated compensation or high compensation. This result demonstrates that employees these days are motivated by issues other than money, which seems to be, on the face of it, the problem with Tina’s organisation.
Therefore, before Tina persists with the “Employer of Choice” strategy, she needs to look more closely at the feedback from the employee survey and find out whether in fact money and the flexibility of work hours are the real issues. It could be that the survey material was not sufficiently probing to reach the real issues, and she could consider bringing in an outside facilitator to assist her to identify the real problems.
She also needs to understand what motivates individual employees so she can find out whether in fact the organisation is meeting their needs, especially the needs for freedom and autonomy, variety and challenge, career advancement and development.
It seems that the perception in the organisation is that employees think that the management doesn’t “walk the talk”. This could well be a central part of the whole issue.
It would be worthwhile having the managers of the organisation take more time to relate to their employees through regular performance management processes and regular performance reviews.
It is not at all clear that the organisation has the robust performance management and human resource policies that would enable Tina to implement a strategy in line with an Employer of Choice profile.
The retention of staff is certainly an issue, with turnover reaching up to 30%. However, Tina must also recognise that, if people are not in positions where they can achieve job satisfaction, they are more likely to leave. And it could well be that, even though salary or flexible working conditions are given as reasons for leaving, when you drill down further, there are other issues that need attention.
It is also important for Tina and the management team to recognise that the average tenure of employment these days is only four and a half to five years. People tend to move between jobs far more regularly than they did in the past.
Therefore, to reiterate, the best option Tina has is to bring in a facilitator to conduct a cultural survey to really get to the fundamental issues, including what motivates the staff, and what is preventing them from doing their work. It is important that the organisation carefully design a survey geared to identifying the key issues at the individual, social and organisational levels. The questionnaire that Tina used perhaps did not identify the real issues.
Proposed solution #2
Michael Goode is general manager of human resources for Queensland Rail with responsibility for all aspects of human resources, industrial relations and training development. He has been involved in human-resource initiatives over a number of years, with particular emphasis on aligning HR strategies with the business directions of the organisation.
It is important that Tina focus on exit interviews for those people departing. Such interviews could be conducted by an independent person to enable the organisation to extract real and relevant information as to why it is losing people. Tina could also consider providing better training to managers in terms of employee management, performance management, and negotiation and communication skills. Each manager would then have a much better hold on what is happening in the organisation and what it is that motivates people.
Able & Willing is an organisation in the knowledge industry and, as such, draws its competitive advantage from the knowledge, skill and experience of its people. In the knowledge and service industries it is clear that technology, machinery and processes can be easily purchased or copied by any organisation. Of themselves these items add no real value. Value is created when employee innovation, creativity, skill and commitment are added. These are the characteristics of employees that win commercial advantages for organisations.
Clearly, there are contrasting positions held by managers in the organisation on whether or not people should be viewed as a cost or an asset. On the one hand, Tina seems to view people as an asset, while Janis sees the cost of people as the dominating measure. Therefore, it is not surprising that, when faced with the prospect of a declining revenue stream, Janis should choose strategies based essentially upon cost containment as opposed to revenue generation.
It must be observed, however, that Tina introduced a major staff retention strategy without consideration of the wider suite of strategies. She accidentally found a retention program and adopted it in isolation from other strategies. The program’s lack of results could reflect a fundamental misunderstanding of staff retention strategies or simply be a case of short-term gain for long-term pain.
The employee survey indicated that the Employer of Choice strategy was targeting issues of limited interest to the majority of employees. Tina seems to have acted prematurely and possibly misread her employee group.
A significant frustration to A&W was the challenge of recruiting specialist staff in a contracting market with competitive pressures driving salaries upward.
Based upon the results achieved by the strategy thus far, there seems little point in continuing with it. Tina’s efforts have achieved no reduction in the turnover rate. Indeed an increase was recorded.
The challenge of staff retention is difficult for many organisations and is dependent on issues such as the type of business, the industry, employee types and the organisations strategic view of the employment market. It comes down to whether A&W wishes to be known as a market leader or follower for the payment of salaries in the IT industry.
Unfortunately, Tina has restricted her staff retention intervention to a single strategy. There is no evidence that she has considered varying strategies aimed at individual and organisational difference. She has already found evidence before implementing the strategy suggesting that salary levels are a demotivating force for some employees causing them to leave the organisation.
In addition, the provisions introduced with the Employer of Choice program are viewed as useful by some and only average by others.
In the development of staff retention strategies, organisations should consider a variety of policies tailored to individual and organisational needs. A suite of policies applied concurrently will be more likely to succeed than any single strategy applied in isolation. Such strategies might include: creative remuneration packaging, tailored employee development programs, interesting and challenging work assignments, travel, access to leading technology and the opportunity to work with high-profile and prestigious clients.
While it is relatively easy to outline a range of retention strategies, developing, aligning and implementing them to achieve maximum “knock-on” effect is another matter.
The ideal platform for this activity is a well-constructed employee performance and development program. Through such a program management can establish and maintain contact with employees in a formal and structured way to look at issues of performance, development, commitment and general levels of morale, all of which affect turnover rates.
The following actions are recommended:
- Cease the Employer of Choice program immediately.
- Determine the suite of staff retention strategies best suited to A&W and its employees.
- Determine the most appropriate method of implementation to maximise the effect of the selected strategies.
- Monitor the result closely.